Question

What is the difference between exogenous and endogenous variables?

Answer 1

Hint Endogenous variables are dependent and exogenous variables are independent. Thus, if the variable is not dependent on the variables within the model, it's an exogenous variable. Though, if the variable is dependent on the variables within the model, it's an endogenous variable.


Complete Step-by-step answer:

An endogenous variable is a variable in a statistical model that has been modified or defined by its relationship with other variables within the model. In other words, an endogenous variable is identical to a dependent variable, which means it is associated with other factors within the system being studied. Exogenous variables are variables whose cause is external to the model and whose function is to describe other outcomes or variables in the model.
The difference between the endogenous variable and exogenous variable is that the exogenous variable is described as the value which is imposed on the model and the exogenous change is referred to as the exogenous variable. However, an endogenous variable is described as the value which is defined by the model.

Note: Endogenous variables are used in econometrics and occasionally in linear regression. They are like (but not identical) dependent variables. Endogenous variables have values that are defined by other variables in the system. An endogenous variable is the reverse of an exogenous variable. An exogenous variable is a variable that is not influenced by other variables in the system. For example, take a simple causal system such as farming. Variables such as weather, pests, farmer skill, and availability of seed are all exogenous to crop production.